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A New Stock Market Angle on Value Investing

24 August 2007 - Features - Editor

Jargon is a convenience and the bane of the stock market at the same time! We are always in a hurry, so it can be tough to use long phrases repeatedly. It also sounds impressive to use terms which lay people do not understand, or which they are hesitant to question. ‘Value Investing’ is a typical example, encompassing everything from some great deals to very damp squids indeed!

Current price is not the only marker of value for the stock market. Relying on individual projections about future fortunes of any company inevitably carries large doses of risks. There are innumerable cases of stock market advisors rationalizing huge departures from their forecasts, by referring to changes in circumstances. However, a large upswing in demand for a new technology with variegated applications can be used as a more reliable indicator of future values.

The stock market can also detect opportunities for huge increases in values of companies in which employees are also share-holders. This is not the same as a stock option plans for selected blue-eyed favorites in cash cows: the actual investments of one’s own savings by employees at all levels in a new entity, is the sign for which discerning stock market investors should search.

VMware from the famed Silicon Valley is a telling example of the best value investing available in today’s stock market environment. The company has unique software which works multiple operating systems together, making it possible for anyone who has more than one hardware system, to coordinate work better, and to save on investments in equipment at the same time. Most VMware employees are owners as well, which means that they have stakes equal to those of any external investors.

Microsoft has systems under development to rival some of VMware’s best inventions to date, but the global potential for software which can join operating systems is so staggering, that there will be plenty of room for new entrants for some time. Perhaps VMware will become a target of a giant in the sector, or perhaps it will soon become another google, but it is great value for investment by all reckoning!

 


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